The company trades for $55 million despite a tangible book value of $160 million! Much of this is made up of current assets like inventories and receivables.

Though Audiovoxx had negative EBIT of $7 million last quarter, management has vowed to cut expenses such that it will be profitable by the end of the year. They are being pretty transparent about how they plan to do so, which gives me even more confidence that the stock trades too low.

First, they have a sale contract on their facility in Orlando, which at closing will reduce debt by $19 million. Manufacturing will now be done in Mexico for lower costs.

Second, they are in “advanced discussions” to sell two “non-core” brands, which in aggregate could add up to tens of millions in proceeds. The term “non-core” is an interesting one. I always wonder how companies come to decide something is “non-core”. It must have been considered “core” or “core-potential” at some point, or they would not have entered the business. So my best guess is that “non-core” means it’s losing money right now, in which case a sale likely helps improve the bottom-line.

We don’t need these guys to be rocket scientists for us to make a lot of money here. If they can cut costs by selling unprofitable lines, reducing overhead, and consolidating their footprint, a return to something near book value seems likely. If they can make a hit product by some accident (like they occasionally have in the past), returns from this level would be amazing.

There is a dual-class share structure here though, so don’t expect someone to come along and bail us out if Plan A fails. We are stuck with this board, for better or worse.

Good luck!

Disclosure: Author is LONG shares of VOXX